Tesla Loses $4,000 on Every Vehicle It Sells
The old adage goes: you have to spend money to make money. While I’ll probably never be liquid enough to put to the test, Tesla has been apparently taking it to heart. It burned through $359 million in cash in the previous quarter. According to a Reuters report, that figures out to more than $4,000 lost on every vehicle it sells. Granted, not even Chevrolet or Ford make money on every vehicle it sells, but it does have a stable of mostly profitable vehicles—tesla doesn't. Tesla sells a relatively expensive, low production car. A car is the first of its kind, and has continually evolved. Unlike a high-volume automaker, where it can make one car once and then design a replacement every seven years, the Model S needs to continually evolve. That takes money. Having cash reserves on hand is important when bringing a new car to market. Reuters claims it takes about $1 billion to develop a whole new car. Following the bailout, GM set its sights on $20 billion in cash reserves. As of June 30, it had $28 billion. Earlier in the year, Tesla had $2.67 billion, but had only $1.15 billion as of June 30. RELATED: Tesla Made Its Model S Even Faster With the P90D Ludicrous Package
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And not only is Tesla spending money on the evolution of the Model S, but it is currently in development on the Model X. Things are stretched pretty thin for the Silicon Valley-based automaker. It says it plans on spending $1.5 billion this year, mainly to launch its long awaited SUV, the Model X.
It is also going to need to spend money to finish development of the Model 3 sedan. Tesla claims the car will start at around $35,000, and the goal is to have annual sales at 500,000 by 2020. That would bring it more in line with the smaller of mainstream automakers, but also means there would be enough of the less expensive, high-volume Model 3, that its portfolio would more closely resemble that of the big players in the automotive landscape.
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